Subcommittee on Tax Matters Ordinary meeting Presentation of the EPRS Study “The Cost of non-Europe: The future of EU tax policy harmonisation”
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FISC European Parliament
Follow its sittingsSpeaker 6
So the view is not to try to harmonize tax regimes and tax rates across the EU, but to see what is the cost of non-harmonization, let's say, of non-coordination. We focus on four main areas, as Marco said. So I'll skip that, and I'll start straight with the first one, which is the wealth taxation. So the first step was to go back and evaluate what the current situation is across member states. And we see that wealth taxes differ significantly across countries in terms of scope, design, and type.
Speaker 5
So, net wealth taxes are quite rare across countries. The same or a bit more for inheritance and gift taxes, with widespread but still large variation. And real estate taxes are, apart from the fact that they are fiscally significant, also much more widespread across the member states. Now moving to the next one. I mean, does this matter? Because of the cross-border friction for taxpayers and tax administrations, the risk of double taxation or even non-taxation in many issues, arbitrage opportunities, and also the consistent valuation methods, consistent definitions, and the rules that apply.
Now, what is the way forward? I mean, it's coordination. We had it before, rather than tax organization. I mean, the previous academic put it as a dilemma: tax over individuals versus tax over organizations. But before going to the tax organization, we should first explore tax coordination as much as possible.
So, preserve national tax sovereignty while easing cross-border distortions. EU coordination should focus on common definitions of taxable wealth, valuation, rules for higher value assets, and common standards for cross-border reporting of foreign-held wealth. So the goal, the aim is to have lower admin costs, improve compliance, but also to reduce arbitrage. Now moving to the second pillar, which was the crypto assets taxation. I mean, here we call it a stress test in terms of tax because of the nature of crypto assets.
They are decentralized. They have a cross-border nature, and this complicates taxation. Challenges for tax authorities in terms of ownership and reporting. Innovation is also evolving very fast, so it sometimes outpaces legal definitions. So, the key issues and the key differences that we observed across member states are on what is taxed.
Some member states tax crypto-to-crypto swaps, others only crypto-to-fiat. How is it classified: as capital gains, personal income, or business income? What are the rates, the reliefs, but also the reporting? So, there is a substantial variation. So the same transaction, the end result could be that it faces different tax rules and different tax bills depending on the member state.
Now how to move forward on that? I mean, we have the directive on administrative cooperation and crypto assets, DAC 8, which mandates cross-border reporting via crypto service providers. The aim is to harmonize, also before going to the DAC. I mean, of course, DAC came into force early this year. But by itself, we'll just solve the information problem, but without greater harmonization or greater coordination, it will not solve the problem of what is taxed, where it is taxed, how, and so on and so forth.
So that's why we say that we need some core definitions, some agreement on how to move forward, and how to build shared enforcement tools. So the decade is a good start, but coordination must go beyond information sharing that will bring transparency. Now, on the next step of digitalization, again, there are quite different approaches. First of all, we focus on the full spectrum of available tools: e-filing, e-payment, taxpayer ID registration, prefilled forms, third-party reporting, real-time reporting, and so on, but also AI tools that could really provide solutions. What is the core issue that digitalization is progressing, but very unevenly across member states?
Some of them are quite advanced. Some others are lagging behind. Now we look at different measures in terms of fee government, in terms of transparency tools, in terms of availability to tax administrations, and so on, into different e-filings across the EU. So, on some things, there is convergence. So e-fillings are widespread for VAT and corporate income tax, but not as much for personal income tax.
Preferred returns are common for PIT, but again, very rare for VAT and CIT. So some basic tools are converging, but again, there is room to do much more and coordinate much better. And that should be the focus. Of course, have the value in the digital area, the Vida, which is a great step. But, again, we also observed this since 2015, if I'm not mistaken.
We again observed some variation in implementation and enforcement across member states. So the unit's baseline digital standards for all tax administration. So we need to provide the tax administrations with the same tools that they need in order to implement and do the work. Now, I'll stop here and pass the floor back to the chair for my colleague to continue.
Speaker 7
So, I can continue immediately. I extend my thanks very much to the honorable chair, to the members, and to the added value units. So, thank you very much for the invitation. I continue immediately with the fourth pillar we examined, and that was the compliance burden. We found out that the cost of compliance does not translate only to the taxes taxpayers pay, but it also translates to the time they spend to comply, to the administrative effort, to the opportunity costs, and other indirect costs. So the time you spend complying with the tax requirements, you could have been doing something else.
And the burden we found is heavier on SMEs and startups. They have to pay higher costs per euro. The reason is that usually they do not have big in-house services. And the same thing happens. The administrative compliance burden is very high, also with cross-border firms.
They operate cross-border, thus they have to face duplicated rules and procedures. And the same happens with mobile, self-employed, or platform workers, who have to operate in multiple states. The guidance is usually unclear, and they are subject to multiple risks. So, why does that matter? Because, as you can see, the same activities and different taxpayers may face different tax compliance risks.
So we found that this is a real issue, a fairness and growth issue, not just a technical one. Now, what does the evidence show? I think it's quite telling to see how this compliance burden translates. So, we found that the time to comply, the annual time to comply, varied across member states. So, for example, we observed huge variations among medium-sized firms. For instance, in Estonia, such firms needed less than 60 hours per year to comply, whereas in Bulgaria, they needed more than 400 hours per year just to meet the tax compliance burden.
What are the key drivers behind this burden? Well, the tax code complexity and the complexity of the rules themselves. And second, the administrative complexity, or in other words, the complexity of processes and procedures across member states. The forms that have to be filled out, the different schedules, and the different audit rules. So, in this respect, our main takeaway is that simplifying procedures is particularly important for taxpayers.
And, because currently, as we discussed before, we shouldn't focus only on tax rules but also on the procedural aspect in terms of compliance. Moving on, what did we find? What can work in terms of compliance? First.
Speaker 7
All we found is that digital tools, which have been expanding, can be of help, but they should be paired with simplified processes. And what do we mean by that? The administrative design across member states does matter. So, for example, you have a single window to submit everything, or a one-time data submission, which is particularly helpful for taxpayers. Vida, we already talked about this.
It streamlines VAT and expands invoicing, but as Apostolos just said, rollout gaps remain. We showed that cross-border firms operating cross-border face a compliance penalty. They have a much higher compliance cost. And what is the challenge? The challenge is that there is no EU baseline for administrative efficiency.
What does that mean? We do not have a minimum. Procedures and how well the administration works are matters for member states. It is very difficult to make this a matter of the European Union. At the same time, another challenge we found was that very few member states were keeping track of or benchmarking the taxpayer burden.
So, the bottom line is that one recommendation we have is that the EU can lead by setting benchmarks and promoting best practices. As I just explained, it is very difficult to harmonize administrative practices. Okay. So, we already spoke about the cost of non-European taxation, which is the main theme of this study, but just to repeat: we are looking at the economic and fiscal losses from the fragmentation of the national tax systems due to the lack of EU coordination. And what does this lack of EU coordination translate to?
It translates into lost revenue. Why? Because the taxpayer shifts their tax base, it may altogether escape member states and taxation in the European Union. They are faced with higher compliance costs. We already explained which taxpayers are affected most by this.
We also explain how the same taxpayers, for example, engaging in cross-border transactions, may be treated unequally exactly because of this cross-border element. And we also showed how, well, we observe weaker enforcement in some member states due to different capacities and data availability across member states. So all these divergent rules may lead to arbitrage and distortions within the internal market, which obviously undermine the internal market altogether. Now, moving on to some numbers. So we tried to illustrate mostly with model-based scenarios what greater EU-level coordination or convergence could yield across wealth taxation, crypto, digitalization of the tax administration, and compliance simplification.
So, we start with the wealth taxation to show how much revenue is lost, based on our calculation, due to this fragmentation exactly. So what we did is we focused on real estate, wealth, and taxation, and net taxation. I will explain. So, first of all, we take individuals with real estate wealth above 1,000,000. This is a relatively small number of individuals with this kind of real estate wealth.
So we calculated the revenue and the status quo in terms of how much revenue the real estate wealth yields, and it is approximately 12,900,000,000 per year at the EU level. So then we estimated that if all countries, all member states with below average tax rates were to converge to the mean tax rate, then we would have an increase of approximately 18%, and thus we could estimate that we would have a revenue of approximately 12,200,000,000. Then we did the same calculations and the same modeling. For real estate wealth, for individuals, real estate wealth above 1,000,000. And of course, the taxpayers with this kind of real estate wealth, there are many more.
So in this case, we calculated the status quo being at $127,800,000,000, the revenue from this kind of taxation. And again, the convergence if all countries below average tax rates converge to the mean would be up to $151,300,000,000. So, this is about real estate, wealth, and real estate taxation. And then we move on to the net wealth tax on financial and non-financial assets. So, what do we do here? We estimate what the revenue would be if all member states, with the exception of Spain, participated.
Why? Because Spain already has a net wealth tax. So, with the exception of Spain, if all member states adopted a 1% rate on wealth above 1,000,000,000. I'm speaking again about the net wealth tax, excluding real estate this time. So, while calculating this, we accounted for two compliance variants.
One is that we escaped a 20% capital flight. So in this case, we expected the produced revenue to be approximately 20,300,000,000 per year for 21 member states. And then we calculated a heterogeneous compliance rate, and there the results varied significantly. So we found that, for example, for some countries, the revenue could be greatly increased, whereas for others, not so much. On the basis of our calculations, we found that by 2035, the projected yield could be 30 to 35 billion per year, assuming, of course, a constant annual wealth growth.
At the same time, we found that when it comes to the imposition of taxes here, enforcement does matter very much. So if we were faced with weak enforcement, then this amount could be reduced by up to 27%. Now, moving on to the crypto gains and the crypto asset taxation. Here, we extrapolate it from Bitcoin data because it is very difficult, as we will show, to calculate the gains arising from crypto assets. So we calculated that the crypto gains for 2024 amounted to approximately 16,000,000,000 across the EU 27.
And for that, we calculated that the tax revenue they should yield, assuming full compliance, should be approximately 4,700,000,000. But at the same time, this full compliance assumption is very difficult. Why? Because, at the same time, we observed massive underreporting in the area of crypto assets. So, for example, just some percentages: 63% in Norway, 90% in Denmark.
So obviously, the possibility that crypto asset taxation could yield revenue depends largely on what kind of enforcement we can expect. So, what are the key coordination tools? Apostolo has already talked about this: the DAC 8 reporting mandates, common taxable event definitions, and aligned valuation and reporting formats. In other words, easy tax: who taxes it, at what point in time, and how valuation takes place. All these vary across different member states.
So what can the EU realistically do, and why? We already talked about taxation being a national competence, and for harmonization to take place, it would happen on the basis of Article 115 TFEU, and we would need a justification based on the single market. So luckily, we do not advocate for this, but instead, as Apostolo said, we advocate for coordination. So, at the same time, we found that the fragmentation costs are high. They lead to duplicated compliance, arbitrage, and weak enforcement.
So, for that reason, we suggest that the EU focus should be on setting minimum standards, not full harmonization, targeting cross-border spillover areas like wealth and crypto. The more mobile the base, the easier it is to escape taxation, and the more difficult it is for national tax systems to act independently. Supporting interoperability in joint enforcement tools, so having compatible definitions, reporting, valuations, and so on. And using benchmarking to scale what works and flag any outliers. So, for wealth taxation, what we recommend is to set a minimum baseline for high-value property.
So ensure that there is at least some taxation on this high-value property. Align valuation methods. We have examples where the valuation of certain property in the cadastre is from the 1930s or 1940s. Develop guidance on inheritance and gifts. Why?
Because they are very easy to fly away. Potentially, and I know there has been discussion on that, an optional EU framework for ultra-high-net-worth individuals. Strengthen enforcement, expand the DAC, for example, to art, yachts, and so on, link any potential registers with the anti-money laundering register, and provide support for weaker tax administrations via technical assistance. And finally, my last slide: what can we do in terms of crypto? Enforce the DAC and the CARF consistently.
Consider a minimum tax floor for realized gains. I told you already that there is no tax on crypto in central countries. Enable joint audits and shared data platforms. And in terms of our last two pillars, digitalization, define a certain minimum of services: e-filing, APIs, interoperability, and standardize e-invoicing and real-time reporting to reduce friction. And finally, about the compliance burden, I already talked about it before, so I won't mention any recommendation again.
With this, thank you very much for your attention, and we both look forward to the questions and the discussion.
Speaker 1
Thank you, Katrina. Very interesting. Now we move to questions from our members, starting with S and D, Matthias Ekke.
Matthias Ecke
Yes. Thank you, Chair. Thank you for the presentation and for the very interesting insights you shared with us, because I think this is definitely an overlooked aspect. We really lose benefits for the common good in the European Union because of the unrealized taxes that stem from non-coordination. These are fiscal, but I think it's also fine that you mentioned these are economic losses because of inefficiencies. And the first thing to tackle, in my point of view, is that we really need comprehensive tax bases in a lot of respects.
I mean, we've been having this debate for a long time about corporate taxes. I'm just looking at Evelyn Reagno, who has been working on that for a long time for corporate tax bases and others. But I think it's important that we have comprehensive tax bases. On crypto, I think it's also a question of financial market stability because if there's a relative privilege in taxation for crypto assets vis-à-vis other forms of portfolio investments, I think that the crypto market might be inflated artificially, which also poses a threat to our prudential network. One thing I would like to ask is, because we are now also discussing the initiative report on financial market taxation, we see that due to the lack of value-added tax application on most financial services, there are also very different regimes in the European member states on how financial market taxes are applied, and what kinds of exceptions and options are used for the VAT problem.
So, would you consider that this is also a part of our taxation system, that one could apply the method you used for non-Europe costs in the field of taxation? Could that also be applied to the taxation of capital income, and also the financial sector in general? And do you have any idea to what degree we have unrealized gains there?
Speaker 4
Yes. No, I mean, agree on the things that you mentioned about agreement, let's say, the common tax base, or agree on that. But also in terms of crypto assets and the financial stability issue, I mean, I'm not sure. I know there are a lot of pieces related to financial margins, and they try to tackle this issue even with supervisory convergence and integration in terms of crypto platforms. We need to know what is used, let's say, what amount of capital goes there, the money, what the gains are, and so on.
So, any tool or any direction towards more information? Because this is a very niche area in which information is significantly lacking. So that should be improved because, as you said, this is a financial stability concern. Yes. But also, yes, it's something that can be applied to financial markets taxation, as you mentioned, and the whole discussion about capital gains and so on. But again, I mean, we can only do as much work as the information that we have available allows.
And that's why our estimates for the crypto wealth tax are based only on what is available, which is not a lot. And we have to, let's say, make several assumptions and consider several ways forward in terms of convergence. This is also how it will be applied and enforced by each member state. So it's not to have a common, let's say, tax base or common tax rates or whatever, but how we make sure that all 27 member states understand it, credit it, and enforce it in the same way.
Speaker 10
Thank you, and thank you for coming and presenting this study. I have a few questions. The first one is actually that when we see the title, "The Future of Tax Harmonization in the EU," not a lot of us would guess that you will deal with these four topics. We have much more important topics on the agenda. So these are not the most relevant ones from my perspective.
But I guess that maybe these are the least explored. So I'm not quite sure that even digitalization is an issue because that is not a cost of non-Europe, since you can have a terrible system even if you have just one fully harmonized system, but a terrible one with a lot of papers and no digitalization. That is not a benchmark. So we need to find out the benchmark. What is a benchmark for these kinds of studies? And I think that, in that regard, we should also look at international best practices in order to figure out what the real cost is of not having an internationally competitive system in the EU. But having said that, I'm not dissatisfied with the report because I think all these aspects are very useful.
Even the net wealth taxation will be very important when members try to move away from labor taxation because of the digitalization of the economy, and they will try to find out the potential of having taxes elsewhere, not only in personal income taxation or labor taxation in general. And also for crypto, it is important for consumer protection and financial sector stability. So, I'm not saying that it is not useful. I'm just saying that the obvious elephant interim was not really very much in the report. And my last comment is that what I felt was also lacking were kind of behavioral responses.
Maybe there is no data available, but for me, the most important thing is whether there is real evidence of jurisdiction shopping or movements because of changes in taxation; in other words, a real behavioral aspect to what extent there is mobility for tax purposes inside the EU. But otherwise, I read the whole report, and it was actually fun to read. So, thank you very much.
Speaker 7
So, thank you very much for the comments. I totally agree with all the comments. One point is that we highlighted in the report certain best practices within the European Union. So we have identified member states where they work very well. They have very good digitalized systems, and we already highlighted that in some countries it takes very little time to comply with domestic rules.
And at the same time, the point was exactly what you mentioned: what is this benchmark? So, practically, it is very difficult to say we will have an EU rule that says you all have to become like member state X. That's obvious. But at the same time, we can somehow illustrate this best practice. I understand it is not only a matter of willingness.
I understand that capacity in different tax administrations varies. But at the same time, that's why we said we can somehow promote best practices, and we highlight these best practices without obviously shaming any other countries that are a bit behind in terms of capacity. Now, in terms of jurisdiction and shopping, I would say again, it depends a lot. So, if you receive a gift or an inheritance, it is a bit more difficult to say, "I will receive that." I mean, because the rules vary depending on where you're the resident, where the person is, where the hair is, and so on and so forth.
So, there, it's a bit more difficult. If we speak, though, of high-net-worth individuals, then things change completely. And there we can see, and it has also been highlighted in daily newspapers, how these people may very easily flee a member state and just move to another one. So again, it depends a lot on which kind of sector we speak about. That's my part.
I don't know if.
Speaker 4
Yeah. If I can say, I mean, digitalization is quite important because it has single market implications and direct implications in terms of, if you take into account cross-border firms, for example, which must adapt to different reporting styles, different formats, different portals, different timelines, and different documentation. So any direction of any action towards making the tax administrator's life easier, but also the one who has to report, easy and fit for the digital era, will be a great success. But also, in terms of the crypto that you mentioned, indeed, you need to know where the risk sits in order to be able to tackle it and address it, and also, in terms of the tax, to know what to tax, where to tax, and how to tax it.
Speaker 11
Yes. Thank you, Chair. Thank you very much. I think this is a very interesting report, and it gives us tools actually, even at the national level, and of course, at the EU level. Also, the smaller the actors, the less they have the means to use tax specialists.
And, of course, it's also to give a level playing field if we have harmonization of the rules. I think the pressure from the U. It is very hard, even at the current level of taxation. And so, actually, I have three questions. But I hope it's okay because there are not so many of us here today.
Please, we don't. So, thank you. Although the first one is like, if we don't do anything, do you have an opinion on where we are going? Like what happens in, let's say, 10 years? Then, when we talk about wealth and taxes for inheritance and gifts, I wonder what you think about the exit taxes and harmonizing them?
Or what is the importance of that? And then maybe the longest question; I even wrote it down. Since in your study you highlighted that the fragmentation of wealth taxation across EU member states creates significant compliance challenges. So, given that the European Commission advocates for simplification, and now it's like the big thing here, what do you think about the radical approach, such as eliminating all the exemptions in wealth taxation and adopting a uniform taxation? It would be a tax on wealth, including both personal and professional assets, as suggested by economist Gabriel Truckmann.
How much do you think this kind of simplification would help to improve tax collection and enforcement, not only for VAT but also for other types of taxation in the EU member states in the future? Thank you.
Speaker 7
Thank you very much. So I'll try to address all your questions in the sequence you pose them. So, if we don't do anything, where are we going? Possibly, we will lose revenue, and this, of course, does not apply to all member states. So if you see the different graphs in the report, you will see how some member states may benefit from that, depending also on the sector.
So it depends, but overall, as the EU, we will certainly lose revenue. In terms of wealth and harmonizing exit taxes, this is one thing because we have realized that personal taxation is actually not a priority. We look at corporate, and somehow, if we said that the first measure in terms of personal individual taxation is actually to impose an exit tax, that would not play out very nicely, I think. Of course, if this were to somehow target high net worth individuals, that would be a different story. Now, I don't know if that would be the best way to go.
We have case law from the European Court of Justice about exit taxes on individuals. It doesn't sit well with the free movement of capital and so on and so forth. But if the first measure for individuals at EU level was to impose an obstacle on them, I don't think it would be perceived very well. And last but not least, comply by eliminating all exemptions. So I think we can discuss the Zukman tax.
I know I'm not supposed to call it that. In terms of it, it's a relatively simple tax. I agree that we can discuss the fairness, the policy questions, and its applications, but it is a relatively simple tax. The question is to eliminate all exemptions. Where? In what kind?
In income taxation? In wealth taxation? For what kind of taxpayers? What kind of net worth do we consider very high net worth? So, there are a lot of nuances in this question that have to be addressed.
But again, I think it would have to be limited to a very specific tax, a wealth tax, and if there are any exemptions, to a very specific category of individual taxpayers if it were to be accepted. Because the idea of the Zucman tax is to target everybody, especially the very rich, who are not covered by income taxes. So, we look at wealth. Right? So that's why I'm saying, for income taxes, for income taxation, it wouldn't be a fit measure to just eliminate all exemptions.
So it would have to be very carefully considered if such a measure were to apply.
Speaker 4
Yeah. I mean, you mentioned the different options, all the different things that we have to think about if we want to go ahead with that scenario, let's say, of tax on high net wealth individuals. But for me, before going there, we also discussed how difficult it will be to fly something like that. I mean, you need unanimity. Why spend all this energy and effort on that instead of doing some simple stuff at the beginning?
Sometimes in Europe, we try to go from zero to 100 in one step, and that's not possible. Let's go a, b, c, d, work all the alphabet. So first, we know we have the tax sovereignty issue and the national sovereignty authority, let's say the power of member states. But let's start by improving a bit the coordination and communication between the member states. And then, if we see that we have some success and we are making some progress, we can move to a more challenging task like the harmonization of introducing a common tax, as mentioned before, also about the digital services tax and all these different options.
I mean, we cannot stay as we are. We are losing revenue. Certain members stage benefit and will continue to benefit. But if we want, as the EU, 20, 7, 28, then we should have a common approach in that step, in the sense that we agree on common rules, common understanding, coordination, communication, and then forward-looking, yes.
Speaker 1
Thank you. Any other questions from your side as I catch your eye? Evelyn, please.
Speaker 13
Thank you very much for everything. So, you really covered a lot. You've already said something, but I'd really like to ask you if you could go a little bit more in-depth on reporting. So somehow, it seems in these days of, as it is called, our simplification or whatever, we shouldn't talk too much anymore about reporting, but you were referring to sort of intelligent cross-border reporting when dealing with cryptos. And I'm really interested in if you could go a little bit more in-depth on how it could look like in order to have nice arguments.
Speaker 1
I will add something, then we will close. One from a hematological point of view, and another one from a content point of view. Realistically, what do you think will actually be the risk of capital flight from Europe in case of a 12% tax at 1%, as you simulated? And the second one will be on the VAT gap, which has been used as a proxy to estimate the efficiency of tax collection as well for financial assets and for crypto assets. Why is that? Why did you choose this proxy, this objective?
Yes. Thank you.
Speaker 4
Yes. I mean, we use different assumptions and different scenarios. We also took this capital flight into account. Of course, when you try to converge into something, you need to assume also that some capital will fly, especially to areas or jurisdictions where it will not be taxed. But again, this is difficult to assume or take into account.
Also in terms of behavioral exercise, let's say how individuals will react, how companies will react, and so on. Now, on the reporting, why should we progress on that and use the tools or all the available tools in terms of whatever that is? I mean, mentioned crypto assets, but also in terms of other e-filing, e-reporting, third-party reporting, collecting information straight from third-party providers and crypto platforms, let's say. But also explore what tools in terms of AI we can use and benefit from because, as we said, we are losing a significant amount of revenues. And we'll continue on that path. I mean, we'll see it also, given the current environment.
We have to discuss competitiveness, digital taxation, green issues, and so on and so forth. So there are many specific tools that we can consider or specifically report, ways that will make life easier. Because, as you said, it's an area where we don't have information. So whatever we can do to collect this information, because also for the study, I mean, we tried to get data on capital gains on crypto assets and so on, but it was impossible. So, we had to rely on past studies and make the assumptions that, over the last 5 years, the market has expanded by that, and so on and so forth.
Also, we didn't focus on Bitcoin, but we focused on all crypto assets. Again, based on assumptions that over the last 5 to 10 years, crypto Bitcoin increased by a certain amount. In terms of market capitalization, it occupies that position. So what is the remaining amount? So there are a lot of elements of uncertainty that we took into account, but we need this certainty actually.
Speaker 7
So in terms of reporting, I'll be brief. But just to give the idea that reporting is not everything; it is not a panacea. Why am I saying this? Because there is a lot of data, not about crypto reporting, but in the context of DAC 6, where each intermediary has to report any potentially aggressive tax planning scheme. And, actually, what happened eventually with this reporting, with this over-reporting, is that the taxpayers, well, the intermediaries from consultancies to accountants to everyone, just reported everything.
Everything. They went with all kinds of data of the taxpayers, and they reported everything. And this led to a lot of information not being used at all. And in the end, of course, to the exact opposite of what was intended. So, on the one hand, reporting is good, but at the same time, it has to be accompanied.
There is a very interesting report by the European Court of Auditors that shows that very often information sent to a member state is not even matched to the taxpayer. So, this is very disappointing. So, reporting is one thing, but it has to be accompanied somehow by some use of this reporting to be effective.
Speaker 4
Can I add one thing as well? I think we're finishing the discussion on simplification. I mean, also Benjamin said that they do this exercise in Digital Exude, which is very welcome. We need to simplify, but we also need to make clear what we mean by simplification, especially in taxation. Previously, we talked about the regulation, but for me, simplification also means having a common understanding and coordination. Make sure that not only countries understand the same thing, but also that, within countries, he mentioned the example of Italy.
So, understanding each other in the same way is also a way to simplify. It doesn't necessarily mean the regulation. And of course, depending on how you aim to simplify, if it's done in a way like the first omniproof on sustainability, then it's not simplification. We need evidence-based simplification based on facts, impact assessments, and so on.
Speaker 1
Thank you very much. I think that we are going to speak on that as well in the next weeks and months, at least in our group politically, because these are, anyway, very interesting issues. It was a very interesting report and presentation. Thank you. Thank you to all of you for the participation.
We will have, in a while, the coordinator meeting, so our meeting will not last long, at least with some of you. And we'll just take a two-minute break. Thank you very much.
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